For nearly a decade a global medical diagnostics company focused on its lead users—specialists in the field that were the most advanced. The company worked hard to understand the needs of these lead users and made them part of their customer advisory board. They also depended on this group for new product ideas and to evaluate ideas they had for product and service offerings. The lead users had become an integral part of the company’s innovation and development practices.
What a mistake! Through the application of Jobs-to-be-Done Theory and the Outcome-Driven Innovation Process, the company learned that its lead users did not at all represent the rest of the user population. In addition they learned that their persistent focus on the lead user population was the root cause of their declining position in the marketplace.
Segmentation Approach and Analysis
We made this discovery by employing the 4-step segmentation methodology that is part of the ODI process:
- First we analyzed the customer’s “job-to-be-done” and captured approximately 170 customer desired outcome statements (the metrics customers used to measure success when getting the job done).
- Next, we fielded a survey where a statistically valid sample of physicians (360 job executors) were asked to rate the importance of each of the 170 outcomes and how well the solution they use today satisfied each outcome.
- Third, we used factor analysis and cluster analysis to segment the market into groups of customers with different unmet outcomes. While 3, 4, and 5-segment solutions were considered, a 3-segment solution was chosen.
- Lastly, we used profiling questions we included in the survey to understand what complexities caused customers in one segment to struggle more than other segments when getting the job done. The survey also revealed the degree to which the outcomes in each segment were underserved.
The segmentation analysis revealed 3 unique segments of physicians as shown in the opportunity landscape below:
The landscape revealed a glaring anomaly: while 79 percent of the market was underserved (the two segments in the lower right of the landscape), a segment of customers, representing 21 percent of the physician population (upper left in the landscape), were highly overserved. As it turns out, this highly overserved segment of physicians was comprised of the lead users in the market.
Through analysis of the data we learned that the physicians in the overserved segment were not at all dependent on the diagnostic equipment produced by the manufacturer to make an accurate patient diagnosis. As lead users they had the experience, knowledge and skill to make an accurate diagnosis on their own—and they only used the equipment to verify they were correct.
If this were the only segment of the market that existed, a Disruptive Strategy would be fitting in this market, as they would settle for a solution that gets the job done worse for a lower price (see the Jobs-to-be-Done Growth Strategy Matrix). But this segment did not represent the bulk of the users.
In stark contrast, 79 percent of the physicians (the two underserved segments) were highly dependent on the diagnostic equipment to gather the needed information and process it to make an accurate diagnosis. Their needs were vastly different than those of the lead users. Because the company was focused on its lead users, they failed to understand the needs of the underserved customers, putting themselves in a position of declining market share.
The discovery of these outcome-based segments changed the focus of the organization. They chose to decouple from the lead user and target the underserved physicians with a new portfolio of products and services that addressed their most underserved desired outcomes.
What were the lessons learned?
- Don’t assume that any artificial or random classification of customers is representative of your market. This includes lead users, but extends to demographic and psychographic-based personas and segmentation schemes.
- Stop using segmentation methods that produce phantom targets. The only way to know what segments of customers exist with different unmet needs is to segment the market around unmet needs.
- Stay focused on value creation until most of the market is overserved. Focusing on a segment of customers who are highly overserved when nearly the entire market is underserved unnecessarily forces a company into a commodity-management mindset. This mindset negatively impacts culture and company performance for an incumbent.
- Tie your strategy to satisfying unmet customer needs.
- Interview customers that represent your market to understand their needs, not lead users.
- A focus on lead users can take you off your path to growth.
Thrilling analysis, bummer of an outcome! As a product person, it’s so tempting to believe that the most sophisticated users represent the future of all users – and that if you serve these lead users really well, that will capture some of the laggards now and some later. Does this data disprove that?